Fiscal Decentralization and Local Environmental Pollution in China

Area of Science:

• Environmental Economics
• Public Policy
• Regional Governance

Background:

• Fiscal decentralization is a key policy tool for central governments to involve local authorities in environmental management.
• The precise impact of fiscal decentralization on environmental outcomes remains debated and requires further investigation.
• Understanding the nuances of fiscal decentralization is crucial for effective environmental governance.

Purpose of the Study:

• To analyze the impact of fiscal decentralization on environmental pollution in China.
• To investigate the moderating role of government environmental preference in this relationship.
• To provide policy recommendations for optimizing fiscal decentralization for environmental protection.

Main Methods:

• Empirical analysis of fiscal decentralization and environmental pollution data across Chinese provinces.
• Distinguishing between fiscal revenue and expenditure decentralization effects.
• Assessing the influence of government environmental preference as a moderating factor.

Main Results:

• Fiscal revenue decentralization significantly increases local environmental pollution.
• Fiscal expenditure decentralization has a less severe, though still present, negative impact on the environment.
• Government environmental preference effectively moderates the negative environmental consequences of fiscal decentralization.

Conclusions:

• Fiscal decentralization's environmental impact is contingent on its structure (revenue vs. expenditure) and governmental priorities.
• Enhancing local government environmental preference is vital for achieving synergistic economic and environmental outcomes.
• Differentiated management strategies for fiscal decentralization are necessary for effective environmental policy implementation.